1 Top Dow Dividend Stock to Buy for Passive Income in July

Key Points

• Chevron currently has a dividend yield above 4.5%.

• The oil giant has the lowest breakeven level in the industry and a fortress financial profile.

• It has plenty of fuel to continue increasing its dividend.

The Dow Jones Industrial Average tracks 30 of the most prominent companies in the country. These mature companies are very profitable, which allows many of them to pay generous dividends. The index currently has a 1.8% dividend yield, which is higher than the S&P 500's 1.3% and the Nasdaq-100's 0.8%.

The Dow is fertile ground for those seeking dividend income. It holds several higher-yielding dividend stocks with an excellent track record of increasing their payouts. One that stands out for income seekers this July is Chevron (NYSE: CVX). Here's why it's a great Dow stock to buy this month for passive income.

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A bankable, high-octane income stream

Chevron's dividend yield is currently over 4.5%. A high dividend yield can sometimes be a warning sign that the payout isn't sustainable. However, that's not the case with Chevron.

The oil giant has built a highly resilient portfolio. The company's business currently has a breakeven level of around $30 per barrel, the lowest in the industry. With crude oil prices in the mid-$60s, Chevron is generating a substantial amount of free cash flow. It produced $15 billion in free cash flow last year after funding capital expenditures of $16.4 billion and another $3.7 billion in the first quarter of 2025. With its dividend costing $3 billion a quarter, Chevron has an ample cushion.

Chevron also has an elite balance sheet. Its leverage ratio was a low 14% at the end of the first quarter. That's well below its 20%-25% target range and toward the low end of its peer group's range.

The company's combination of a low breakeven level and fortress balance sheet puts Chevron's high-yielding dividend on a firm foundation.

The fuel to grow

Chevron has been investing heavily in high-return capital projects, which are driving growth in its production and free cash flow. The company and its partners recently completed the Future Growth Project in Kazakhstan and the Ballymore project in the Gulf of Mexico, also known as the Gulf of America in the United States. It has more projects in the Gulf and the Eastern Mediterranean that should come online soon. In addition, the company is developing its assets in the Permian and DJ basins in the U.S. Chevron estimates that its current slate of growth projects puts it on track to add an incremental $9 billion in annual free cash flow by next year, assuming a $60 oil price.

On top of that, the company is waiting to close its mega deal for Hess. It agreed to buy the fellow oil and gas producer in late 2023 for $60 billion. A dispute with ExxonMobil over Hess' stake in their lucrative development offshore Guyana is currently holding up the transaction.

The case has gone to arbitration, with a ruling expected soon. Chevron is so confident it will win that it spent $2.2 billion to buy nearly 5% of Hess' outstanding shares on the open market earlier this year. Winning the case will allow it to close the needle-moving deal, which will extend its production and free cash flow growth outlook into the 2030s.

Even if it loses its case and can't close that deal, Chevron has plenty of growth ahead. As a result, the company's dividend growth engine won't run out of gas. The oil giant has increased its payout for 38 consecutive years, a period spanning multiple commodity price cycles. The company has delivered peer-leading dividend growth over the past decade.

A well-oiled, dividend-paying machine

Chevron currently offers investors an attractive dividend yield due to the uncertainty over the fate of its Hess acquisition and the volatility of commodity prices. However, the company has a highly resilient portfolio and a fortress financial profile, which puts its high-yielding dividend on rock-solid ground. Meanwhile, it has lots of fuel to grow, even if it can't close its deal for Hess. Those features make it a great Dow stock to buy this July for a lucrative and growing stream of passive dividend income.

Should you invest $1,000 in Chevron right now?

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Matt DiLallo has positions in Chevron. The Motley Fool has positions in and recommends Chevron. The Motley Fool has a disclosure policy.